Surrender, Sell or Keep ??

EdInvestor

Hi again Kirsty

KirstyD wrote:

Projected value as at yearly statement Sept 06 was:

Low rate £10,600
Intermediate £12,400
High £14,500

Thanks

Two calculations needed here.First, should you keep the endowment? [I'm leaving the redress money out of the picture at present.]

If you surrendered it and used the lump sum to reduce your mortgage loan and then increased the monthly mortgage payment by the endowment premium to maturity, your return would be 13,479.

That's almost as good as the high estimate quoted above, which is generally viewed as a completely unrealistic forecast and is a guaranteed return with no risk, unlike the endowment.

So it looks like it's not worth keeping the policy, though if you need the life cover and it would be expensive to replace, that would need to be taken into consideration.

However, deciding on the two choices offered will be affected by the tax question, so perhaps you could call up and check the final after tax figure you would get if the polcicy was cancelled.Then I'll do the second calculation and we should have a result

KirstyD_3

Phoned SL - I was told that if I surrender the policy there would be no chargeable gain as the pollicy is over 10 years old therfore tax is already paid ???

If I went for the refund of premiums with interest then because I am a basic rate tax payer I wouldn't be subject to paying tax on that amount either - this was what I was informed

Thanks v much

EdInvestor

KirstyD wrote:

I have been offered £1040 compensation or
£5252.25 to surrender or
cancel policy and receive premiums back of £4204.72 plus £1906.41 interest = £6111.13 as of last week.....

On the assumption that the surrender option will produce a lump sum of 6,292, if you use this to reduce the money owede on the mortgage and increased the mortgage payment by the endoment premiumj, then the return at maturity would be 15,277.

With the refund of premiums and interest the return would be 14,967.

So looks like surrender is the way to go.

KirstyD_3

EdInvestor wrote:

On the assumption that the surrender option will produce a lump sum of 6,292, if you use this to reduce the money owede on the mortgage and increased the mortgage payment by the endoment premiumj, then the return at maturity would be 15,277.

With the refund of premiums and interest the return would be 14,967.

So looks like surrender is the way to go.

Thanks for the advice